The climbing stock market’s effect on housing

Did you know interest rates climbed about 1/4 of a percent in the aftermath of Donald Trump’s election? This was the biggest single-day rate increase in three years.

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Despite being told over and over again that a Trump victory would result in lower rates, the opposite has happened. In a recent Forbes column (Dec. 6 issue) Gary Shilling said he thinks the markets have massively overreacted to Trump’s election. He points out that the root causes of weak economic growth (that have kept rates low) will remain. He also says that Trump’s proposed tax cuts and stimulus programs will be watered down by Congress; the expectations of an economic boom are overblown. If he is correct, this means rates may fall again.

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This now begs the point: nobody can predict anything in this market. So, if you have been thinking about buying or selling, is it time to get off the fence? Rates are still historically low, but for every 1/2 percent increase in rate on a $500,000 loan, the payment increases about $140 to $150 (and even less after “tax benefits”). Should buyers and borrowers wait to see if rates fall before moving forward with transactions? Absolutely not. Borrowers can easily take advantage of no-cost refi’s if rates fall.

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If you do decide to buy or sell, give me a call, I would love to help you navigate the process!

Will the Presidential race affect our mortgage rates?

I thought this might be interesting to share. Traditionally, there is very little on the market as we enter the holiday season. The last couple years, sellers listing in December and the beginning of January tended to have multiple offers because there isn’t much inventory (meaning, people don’t like to have Open Houses or showings during the holiday season as they are usually entertaining family or friends).

With the Presidential election around the corner, many agents are getting the feel the market has softened. It will be interesting to see how this year’s election will affect our market. Here are some insights from my friend Jay Vorhees at JVM Lending:

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Trump = Lower Rates; Clinton = Same or Higher Rates

We have blogged several times about how rates are not held artificially low prior to major elections. It is a myth that they are. Presidents, in fact, like to see proof that the economy is getting stronger, and these signs usually push rates higher. Presidents hope for positive signs like GDP growth, job growth, lower unemployment, etc. These signs usually push investors into stocks and out of bonds, causing rates to go up.

(Quick reminder: When investors demand more stocks, rates go up; when investors demand more bonds, rates go down.)

With respect to Donald Trump and Hillary Clinton, it is all about “stability.” Stock market investors like “stability” as much as they like growth. Worries about instability or shakeups send investors away from stocks and into the safety of bonds (pushing rates down).

Investors believe that Clinton will follow President Obama’s course, and this is perceived as “stability.” So, signs that Clinton might win will probably keep investors in stocks, which will ultimately keep rates largely the same.

Investors are not sure what Trump might do, so signs that Trump might win will probably push investors to the safety of bonds, pushing rates lower.

This is very similar to the uncertainty the Brexit vote created and its influence in pushing rates lower.